Four Reps Win More Than $400,000 in Raiding Counterclaim

An NASDR arbitration panel didn't buy Dean Witter's claim that four brokers who left its Worcester, Mass., office in a raid by Legg Mason should be punished for breaking their non-compete agreements. In a Nov. 5 decision, a panel of NASDR arbitrators instead punished Dean Witter, awarding the brokers more than $100,000 each on their counterclaim.Most of the award was earmarked as compensation for

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An NASDR arbitration panel didn't buy Dean Witter's claim that four brokers who left its Worcester, Mass., office in a raid by Legg Mason should be punished for breaking their non-compete agreements. In a Nov. 5 decision, a panel of NASDR arbitrators instead punished Dean Witter, awarding the brokers more than $100,000 each on their counterclaim.

Most of the award was earmarked as compensation for "loss of reputation," "wrongful injunction" and punitive damages, according to the award summary. The brokers also claimed that the firm had refused to transfer accounts at their customers' request, in violation of NYSE and NASD rules.

Dean Witter claimed that brokers Peter Caruso, Robert Cotter, Michael Kelleher and Mark Cote breached their employment agreements when they brought over to Legg Mason client accounts that produced a combined $1.7 million annually, recruited a Dean Witter sales assistant and used confidential Dean Witter records.

The firm asked for almost $2.4 million in compensatory damages against the brokers and another $1 million in punitive damages against Legg Mason for raiding.

Dean Witter obtained TROs in court against the brokers on Nov. 15, 1996. The order allowed the injunctions to stay in force until the NASDR arbitration began. It took 25 days for the arbitration panel to be assembled; the panel then dissolved the injunction.

The brokers claimed their business was "effectively shut down" by the slow arbitrator selection process, the case summary says. They also alleged Dean Witter intentionally violated customers' account transfer requests.

The panel rejected all of Dean Witter's claims. Legg Mason collected $15,000 on its claim of damages as a result of lost production.

The panel also awarded nothing on Cotter's and Kelleher's claim of fraud by Dean Witter related to the conduct of John Pierce, manager of the firm's Worcester branch. Pierce died before the arbitration decision.

None of the firms, the brokers or the attorneys involved in the case would comment.

In a separate but similar case concluded in August, an NASDR arbitration panel made a disciplinary referral of Dean Witter over the firm's refusal to process account transfers of clients belonging to former Dean Witter rep Robert Zielke, now with Bear Stearns in Chicago. Dean Witter had claimed that Zielke's non-compete agreement allowed it to ignore account-transfer requests from 42 customers.

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